DLA`s Sales and Operations Planning Capability

DLA’s Sales and Operations Planning Capability:
How to Align Budgets and Purchases with
Warfighter Demands
Ms. Simone Reba, SES
June 4, 2010
Workshop Goals
• Introduce Sales & Operations Planning
• Explain how DLA uses S&OP to drive
improved customer readiness
• Discuss how customer collaboration and
DLA’s S&OP process can help all of us
better serve the Warfighter
Funding for this FY has been cut by 10% from last year
numbers while Sales are forecasted to remain flat *
FY ‘09
– Funding was $500M
– Sales were $500M
FY ‘10
– Funding is $450M
– Forecasted Sales for FY ‘10 is $500M
3 Weapon Systems are supported:
– H-60: FY ‘09 Sales $150M, FY ’10 Forecast $150M
– C-130: FY ’09 Sales $250M, FY ‘10 Forecast $200M
– F-18: FY ‘09 Sales $100M, FY ‘10 Forecast $150M
What do you do?
* This data is fictitious and is used for illustrative purposes only
How do you resolve this imbalance?
Issue: Funding shortfall of $50M
– Cut each Weapon System by $10%?
– Fund only low dollar PRs to improve PR
award rates, but limit expenditures?
– First purchases in gets awarded, no awards
when the money runs out?
– Ignore it and hope for additional funding?
for DLA, the solution is Sales & Operations Planning
Sales and Operations Planning Background
S&OP is a forward looking process for managing your organization
– Creates a path for resolving Supply & Demand imbalances.
– Brings together expertise from Demand, Supply, and Finance areas to
• Define a complete picture of the issue resulting from Demand or Supply events
• Build a prioritized business plan that aligns enterprise objectives with workload and
budgetary constraints
– Review current performance and future projections
– Standardizes requirements for management review
Benefits of S&OP
– Inputs from Demand, Supply, and Finance ensure a balanced, realistic, and
sustainable solution
– Standardizes the approach, including metrics, tools, formatting, etc so that more
time is spent on issue analysis resolution rather than on formatting slides
– Provides a method to prioritize constrained Resources, Time, and Workload
– Action Plans that are directly linked to business performance metrics
• At DLA, business simulation utilized to enable investment/support decisions
How we use S&OP at DLA
Business Planning: -forward looking metrics
Collaboration: We review these business plans with Customers and
Suppliers at
– Customers: Validate and adjust forecasts
Examples of customer collaboration: NAVAIR: F-18, F-402, AFGLSC: C-130, KC-135
– Suppliers: manufacturing capabilities are in place and prepared
Examples of Supplier Collaboration: Honeywell, Boeing, and Lockheed Martin
Simulation: Used to evaluate different scenarios and their impact on the
business, including OA, inventory, and readiness
Performance Management: Enterprise level metrics with drill down to the
detailed item level – Percent Forecast Error, Perfect Order Fulfillment,
Attainment to Plan
Decision Making: inputs to drive decisions on funding allocation, and
performance goals
Monthly S&OP Cycle/Construct
Week 1: Intelligence Gathering (finalize focus
areas for Demand Consensus and Supply
Consensus Sessions)
Week 2: Conduct Demand Consensus and
Supply Consensus Meetings within each Chain
Week 3: Conduct Enterprise S&OP Meeting
Week 4: Input into Demand Month End and/or
Demand Month Start processing
Agency Strategic Priorities are established at the beginning of the Fiscal
Year and inform/guide the monthly S&OP process
Demand-Driven S&OP Scenario
Scenario: Significant Change in Forecast for a Weapon System (F-18)
• 50% increase in projected sales over last years sales
Weapons System and Business Process offices
Weapon System Support Manager (WSSM): Collaborates with Customer and incorporates
change in Forecast
Business Process Support (BPS) Analyst: Utilizes S&OP Simulator Tool to project impact of
changes in Demand. Utilizes S&OP Metrics Tool to Review Key Metrics: Percent Forecast Error
(PFE) / Attainment to Plan (ATP) / Perfect Order Fulfillment / Over-Procurement (OP) /
StockOuts/StockLows (SO / SL)
Customer Facing
Demand Planner (DP) Collaborates with
WSSM and Customer gain Demand
Uses Customer Intelligence to create
Accurate Forecast
Utilizes S&OP Metrics Tool to improve
forecast accuracy
Supplier Facing
Supply Planner works with DP & WSSM to
develop Supply Consensus and incorporate
market conditions/constraints
Acquisition Specialist determines workload
prioritization (Purchase Requisitions)
S&OP Action Plan for the F-18
Trigger Event: F-18 Maintenance overhaul program ramping up from 10 to 15 aircraft per month.
Action 1: Weapon System Support Manager (WSSM): Collaborates with Customer on necessary
Forecast updates
Action 2: Business Process Support (BPS) Analysts simulate impact of changes in Demand.
Review Key Metrics: Percent Forecast Error (PFE) / Attainment to Plan (ATP) / Perfect
Order Fulfillment / Over-Procurement (OP) / StockOuts/StockLows (SO / SL)
Action 3: Demand Consensus determines that the forecast is reliable and level 1 priority Placed at the top of the priority list for Demand.
Action 4: Supply Consensus determines that funding support for the C-130 will have to be
reprioritized in order to support this F-18 project. DLA works with the C-130 customer to
evaluate moving their requirements to the next fiscal year and/or reducing safety stock
Action 5: The Project Quad Chart and the results of Supply and Demand Consensus are
presented at the Aviation Internal S&OP Meeting for Command approval of the F-18
F-18 Project Quad Chart
Aviation Demand Chain Issues
Path Forward
• Issue w/supportability of F-18 Overhaul Program
• Short-Term
• Monitor PR/contracts for SO/SL (ongoing always)
• 150 healthy NSNs ( ( 4 PRs pending award and 31 PO s)
• Production will ramp up to 15 aircraft per month (180/yr)
• 150 critical items
-100% replacement items (100) + Safety critical Items (50)
-High supportability for 150 items will allow 15/mo overhaul rate
Supply Chain Outstanding Issues
• Long-Term
• Continue to collaborate with suppliers to ensure they
have the production capacity to meet these requirements
S&OP Approval Date 18 Jun 09
Short-Term : Issued SC email 8 Jul 09
• Obligation Authority required to support this $150M, $50M increase
over previous year
• OA will need to come from the C-130 platform to support this
Key Performance Indicators
• Positive…Health improvement monthly on NSNs due to getting
PR awarded and early deliveries .
Customer Service
Critical OTOF: 81.85% ; POF 65.57%
Forecasting Accuracy
Critical Abs PFE 24.5 Dec-Feb 10; Critical DPA 59.7%
FY 2010 Projections
Critical ATP 68.5% (Feb 10)
Red – Baseline / Current
Yellow – Baseline / Current
QA: 2009-009
Ob Authority
Results Oct
Net Cash Flow
Original Estimate
to date
OPR: Bill Smith
Before and After S&OP
Before S&OP
After S&OP
• Collaboration may or may not
have occurred
• Collaboration occurs early and
the details are reviewed with
the customer
• Impacts of additional demand
would not have been simulated
and analyzed to determine
• System would have had a
delayed reaction once the
increased demand is realized
– resulting in backorders
• Simulation is performed to
determine impacts on funding,
workload and supportability
• Information is loaded into the
system to adjust forecasts in
anticipation of the demand
• Funding constraints may have
been pushed off rather than
addressed up front
• Funding constraints are
resolved early in the fiscal year
and/or at the beginning of a
• All needs impacted
• Focus on most important
S&OP – Before and After
Demand Shift
Demand Shift
S&OP can adjust forecasts to reflect increases/decreases in demand
Ob $
Inaccurate forecasts will result in poorly timed buys in large quantities and will
likely lead to overprocurements. Note, S&OP helps level the Ob $.
High-Level Program Budget Review Process
1. Develop Senior Leader Strategy
Target Performance Levels
Synchronize with Strategic Planning
2. Obtain workload projections
3. Develop Materiel and Operational resource
4. Determine Affordability
5. Rate/Rank Proposed Investments
6. Develop Enterprise Proposal
How’s S&OP Going at DLA?
Full transparency – ensures outcomes
are aligned with Strategy
Single, defined set of priorities – all
singing (working) from the same sheet
of music
Financials linked to Strategy
Streamlines complex Budget
formulation process
Provides execution accountability
Greater partnership with Customers
improving information sharing
Simulation capability details potential
impacts of alternative Strategies, and
ensures informed decisions
Senior-most Leadership ‘buy-in’
Obtaining ‘actionable’ Demand
intel…very difficult for Military Services
to predict future contingencies
Full ‘buy in’ – S&OP is still perceived
by some as a meeting requirement
vice a cadence for business
Maintaining FUTURE focus…much
easier to measure the past than to
manage the future
When making tradeoff decisions,
deciding what NOT to do
Meeting preparation…timeliness of
input, cross-organization consistency
S&OP Take Aways
• Effective, proactive business model to balance supply & demand
– Forward looking business plans/budgets utilizing customer forecasts
– Balanced supply and financial constraints against requirement
• Facilitates collaboration between DLA and Services
– Reduced forecast error to achieve more accurate budgets
– Prioritize customer needs to ensure Warfighter support
– Improve cost to serve by reducing excess inventory
• Rapid decision making supported by business simulation
– Projected business impact (budgets, workload, inventory) of actions
enables executives to make quicker, more effective decisions
• Alignment of S&OP with enterprise performance reviews
– Measure impact of S&OP decisions on business performance goals
– Identify opportunities and actions to improve top priority initiatives
Real Results at DLA’s Aviation
Supply Center
Nov 2009: Training provided to WSSMs on the application of the Sales and Operations Planning
(S&OP) Tool. This provided the ability to conduct monthly reviews on their top Percent Forecast
Error (PFE) NIIN Drivers and validate future forecasts on NIINs
Nov 2009: Aviation Demand Chain’s previous 12 month’s demand value was $3.0 Billion and the
next 12 months forecasts were 3.4 Billion. The difference between our actual demand and
future forecast was approximately $400 Million.
Dec 2009: The WSSMs began monthly validations of forecasts on the NIINs that were the drivers
on their platforms for the increased forecasts.
Mar 2010: Aviation Demand Chain’s previous 12 month’s demand value was $2.8 Billion and
the next 12 months forecasts were 3. 0 Billion. The difference between our actual demand and
future forecast is approximately $200 Million.
This represents a 400 million reduction in forecasts over a 4 month period since Aviation
Demand Chain WSSMs began focusing on Demand Consensus.
Real Results (cont.)
• Some specific Platforms examples are;
– H-47 WSSM identified approximately 50 NIINs that had invalid
Special Program Requirements (SPRs). The WSSM
collaborated with the customer to have these cancelled or
adjusted. This resulted in $12.8 Million in reductions to forecasts.
– TF-34 WSSM has reduced forecasts $34.8 Million since Nov 09.
This was the result of collaboration with the customer to cancel
unneeded SPRs and reduction of overforecasted DFUs
– In Feb 10, the F-15 WSSM identified one NSN that had $23
million invalid forecast due to erroneous provisioning (SSR)
requirements. WSSM collaborated with customer and had these
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